Spectrum Asset Management, Principal Asset Management’s preferred and capital securities investment manager that manages $19.0bn client assets, in partnership with Principal Asset Management, today announced the launch of two new UCITS funds on its Irish platform, as the group strengthens its investment capabilities and ability to meet client needs in Europe and beyond.
With a market size of approximately €500bn, the maturity of the Euro-denominated capital securities sector is opportune for investors seeking to increase their allocation to high grade, higher yielding fixed income.
“Major central banks are likely to cut interest rates in 2024, paving the way for attractive yields, and preferred and capital securities are in a position to outperform this year,” says Mark Lieb (pictured below), president and chief executive officer, Spectrum Asset Management.
“With more than 35 years of experience as one of the largest specialty managers of preferred and capital securities in the world, launching two bespoke funds for European investors places us in optimum position to manage a liquid and diversified fixed income strategy for existing and new clients in the region.”
The Principal Capital Securities Fund (PRGCIAU), aimed at Euro-focused fixed income investors, will invest in Euro-denominated capital securities and hybrids issued predominantly by European banks, insurance companies and corporates. The majority of the Fund’s investments will be rated as investment grade quality and will benefit from non-financial diversification and modest exposure to Cocos.
Meanwhile, the Principal High Grade Capital Securities Fund (PGIGRCI) will invest in an all investment-grade rated portfolio of Euro-denominated capital securities and hybrids, again issued predominantly by European banks, insurance companies and corporates, targeting Euro-focused risk sensitive fixed income investors across wealth, insurance, pension and third-party distribution divisions. To address the needs of more risk sensitive investors, the High Grade fund will not have any exposure to Cocos.
“In partnership with the Principal UCITS platform, where we already sub advise the $3.9bn AUM Principal Preferred Securities fund, the launch of these two new UCITS funds cements our commitment to European investors,” says Isabel Faragalli (main picture), managing director, Spectrum Investments, Principal Asset Management.
“Leveraging our core skills and competencies in capital securities and hybrids globally, our diversified approach in terms of industry, country, and security concentrations, as well as deep market expertise, presents a compelling offering for investors looking for attractive returns in the high quality European capital securities and hybrids space.”
Both funds are SFDR Article 8 compliant and aim to fill the current gap in the European subordinated bond fund landscape through industry diversification and a high-quality approach to credit and risk management.
